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October 26, 2010 / marios

Double Irish and Dutch Sandwich

Here is a graphic explaining the  “Don’t be Evil” company’s tax-cut strategy:

Inside Google’s $1 Billion-a-Year Tax Cutting Strategy

To summarize the graphic, Google evaded $3 billion in taxes since 2007 from revenue on business conducted abroad, by employing a strategy that involved lenient legislation in three countries: Ireland, the Netherlands, and Bermuda.

It is illegal for individuals not to pay taxes on money deposited in offshore accounts  (it is the responsibility of the tax payer to declare all capital gains in investments abroad or risk going to jail). Why is it not the same for corporations? I guess the answer here is not simple. If the government imposes steep taxes to corporations (especially for revenue from offshore business), all the corporation has to do is close shop and move to countries with more lenient tax requirements. This would also result in loss of jobs. On the other hand, allowing corporations to evade taxes imposes greater burden on individuals. Nevertheless, increasing taxes on individuals who work for such corporations (especially for people at the higher levels of the hierarchy who tend to make the most money) is an effective indirect way of taxing the corporation itself. Otherwise, simply put, the rest of us foot the bill.

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